How to diversify your business

Many strong businesses have diverse income streams, and the advantages of diversification have been well and truly reinforced through the recent epidemic shutdowns. Now as many business owners begin to re-emerge from the COVID-19 blockade, concerns about futureproofing are being discussed. How do you make sure your business thriving again when borders are closed? Does your existing product make sense in the ‘new normal‘? Most importantly how can you be prepared in the event that we are forced to enter lockdown once more? The answer might lie in diversification of your business.

Why diversify?

This is something experts have witnessed unfold in the first quarter of this unusual year of 2020.

Diversification in your business is a smart way to decrease your risk when working in an unstable economy. This means that you have a back-up plan should anything go wrong.

Diversification can protect you not only from shocks that aren’t anticipated, such as COVID-19 However, it also shields you from more familiar problems like when competitors come along.

There are plenty of diversification options available, but there’s plenty to be aware of prior to diving fully.

We’re not going to suggest that you go out and do something insane, such as investing large sums of money in something you are just not comfortable with. However, if they think about their current work environment and know-how - there’s always a plethora of peripherals that they’re probably not in which could offer enormous opportunities for them because they’re still in their comfort space.

Getting started

Before embarking on your diversification journey, it’s crucial to complete your homework.

Know where you’re going and who your competitors are especially if you’re entering into a brand new market.

For instance, if you’re making machinery to be used in the industry of food, the best location to look for could be consumables. In a healthy economy, the machinery is selling, but in a not that good economy, as today, people are still purchasing the consumables.

In the event that you do not have the understanding of the market you’re trying enter, it’s just like driving down the road with a blindfold on.

It’s best to stay with what you’ve learned, especially if this is your first time to dip your toe in the diversification pool.

If you’re planning to diversify into a market that isn’t within your business expertise or skills it’s best to consider hiring someone who does have that expertise. Everyone is good at certain aspects, but not great at other things. So, make sure you hire employees who have the skills and knowledge you require. If you don’t have that, you’re just adding to the risk.

The risks to be considered

Diversifying your business means diversifying your attention.

Your objective is to satisfy your customer and grow your base of clients. This means that the issue you face when you expand your company is that you’re using staff to develop your new product. If you’re not carefulyou’ll end up using all your resources on new opportunities and leave the current ones behind.

It’s incredibly important to ensure you’re satisfying the customers you already have and growing your customer base.

Be careful not to chew more than you’re chewing.

Be aware of taking the time to accomplish this. I’ve seen countless businesses throughout the years that go broken because of doing something wrong… even the big, smart ones.

That’s the challenge of being a small business owner, he says. You have many of the same challenges similar to big corporations, however, you have less money to respond to and correct your mistakes. Therefore, you need to be careful.

Changes in the business or any investment in business comes with not without risk, but there are some excellent risks and make extremely smart decisions, earning yourself a lot of cash and make it successful… provided you’re smart about it.

Finding opportunities

Diversification was an essential requirement in some industries, like one that makes gelato, which operates predominantly as a wholesaler of restaurants and gelato sellers. However, by February of this year, they began to notice problems appearing in the near future.

"I did not think that it would affect us much, but I did see the news from out of the country"

But then one of their largest clients, whose business relied heavily on tourists from overseas, stopped making orders.

At this stage the group was one week into lockdown when they realized they needed to have a plan of diversification if they were going to make it through.

"I started looking around for other businesses we could invest in that might be complementary to the work we’re doing"

"I discovered another company that actually supplied supermarkets. I began to work on purchasing the business during lockdown. In the end, I bought half of the business."

That move didn’t just bring in a new client base. It also allowed the company to expand their business.

"Their manufacturing was done by an outside contractor. So, by us buying it, we’ve actually bought their manufacturing contract"

"If we enter another lockdown or something happens that’s not the end of the story, but we’ve got the grocery side of the business which will carry on."

It was an excellent way for a business to take the chance to improve the strengths the company already had.

It can feel like a do-or-die scenario. However, over-reacting to situations could hurt you in the long run.

"Part of the problem is that when people find themselves out of the woods, they make mistakes. Especially now with the impacts of COVID-19," He states. "So my advice is to seek advice that isn’t emotional from someone who’s not directly connected to your business.

"If you’re experiencing emotional distress or financially and the stress is piling up, then go and find some assistance. Call the number and talk to someone. There are lots of clever people out there who can aid, so don’t take on the whole thing by yourself."